Author Question: If the U.S. interest rate differential falls, then the exchange rate A) does not change. B) ... (Read 22 times)

karateprodigy · **on:** Jun 29, 2018

If the U.S. interest rate differential falls, then the exchange rate

A) does not change.
B) definitely falls.
C) definitely rises.
D) falls only if it was the U.S. interest rate that changed.
E) rises only if it was the foreign interest rate that changed.

Question 2

Explain the relationship(s) between full employment, cyclical unemployment, the natural unemployment rate, and potential GDP.

What will be an ideal response?

Expo · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

The economy is at full employment when there is no cyclical unemployment. The unemployment rate at full employment is called the natural unemployment rate. Because there is no cyclical unemployment, the natural unemployment rate is comprised of only frictional and structural unemployment. The level of output that the economy would produce if it was at full employment is called potential GDP.